MORE MISINFORMATION ON CHINA MARINE FOOD GROUP

On June 29, 2010 the stock of CMFO closed at $3.82, down 9% on volume that was 3x greater than the previous day’s volume. The selling pressure continued on June 30th, when the stock traded as low as $3.07 (down 20%) on even heavier volume. I believe a majority of this selling pressure resulted from the publication on June 29th by a well known company of an article that was critical of CMFO. This article stated that, contrary to management’s claims, CMFO’s Hi-Power beverages were not being sold in Wal-Marts in Fujian. Furthermore, the article advised investors to sell their CMFO shares. More importantly, the article seriously damaged CMFO’s credibility by implying that management was not being truthful with U.S. investors.

However, upon further review, it appears that CMFO’s management was being completely honest and that the article was actually inaccurate. Hi-Power is indeed sold in Wal-Marts in Fujian. Several large investment firms have visited Wal-Marts in Fujian and confirmed that Hi-Power is being sold there. I have also had people visit some Wal-Marts and they too confirmed management’s claims. CMFO has also published pictures on its website of Hi-Power being sold in Wal-Marts (http://www.china-marine.cn/eng/p2.asp?ItemClass1=Retail+Sales+Points) , although admittedly the layout of the pictures is not as clear as it should be.

This is just another example of some of the misinformation that has recently been published regarding CMFO. Unfortunately, CMFO’s management has not aggressively attempted to correct all of this misinformation. As a result, even though CMFO’s stock price has started to recover, its current low p/e reflects a continuing lack of investors’ confidence in management. I expect that as investors continue to separate fact from fiction and as management regains its credibility (primarily by delivering on its projections for Hi-Power and hiring a top auditor), CMFO’s stock price will outperform.